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American standard of living poised to plummet, report says

This sign indicates that this business accepts EBT, or Electronic Benefits Transfer, a system that allows public assistance benefits to be issued via a magnetically-encoded payment card. The American standard of living will decline by 9 percent by 2030 unless efforts are made to address such issues as productivity growth and a shrinking labor force, a new report says.
(Associated Press file photo)

CLEVELAND, Ohio - The American Dream, rooted in the belief that each generation will do better than the last, is threatened with devolving into a pipe dream, according to the findings of a recent report.

The standard of living in the United States is in danger of declining by 9 percent by 2030, back to what it was in 2000, says the report by Accenture, a global consulting company. Ohio is expected to do a little better, declining only by 7.8 percent.

For many, returning to 2000 may sound pretty good. It was several years before the Great Recession. Wages, for the most part, were still rising across the board. The proliferation of lower-wage jobs, a post-recession trend, was years in the future. But when one looks at gross domestic product, or the total value of goods produced and services rendered in the U.S. during a year, things have gotten better, said Peter Hutchinson, the Accenture managing director of public service strategy, who authored the report.

"The standard of living is higher now -- if you measure it in terms of gross domestic product per person -- than it was in 2000 even if median wages, for example, may not be," he said. "The standard of living includes the whole of the economy, not just the wage economy."

The report says anticipated declines in the living standard are being fueled by three factors undermining the labor market: lower worker participation rates, inadequate productivity growth and a shrinking working age population.

Hutchinson said Baby Boomers reaching retirement age will have a huge impact on the relative size of the working age population, or those 15 to 64. The working age population was 66 percent in 2013, and Accenture estimates it will decline to 61 percent by 2030.

"The economy was growing because the working age population was rising as a percentage of the total population," he said. "Now, it is starting to decline."

Hutchinson said the other two factors working to reverse the standard of living are of greater concern.

"The level of productivity growth is back to 1960s levels," he said. "That is very troubling. That is not a rate of productivity growth that sustains wages. It doesn't sustain employment and it doesn't sustain our economy."

Labor force participation rates have been falling across all demographic groups in recent years. Hardest hit are the youngest workers, or those ages 16 to 24, a trend Hutchinson considers alarming. He cited an Accenture survey this year of recent college graduates, in which 46 percent of respondents considered themselves underemployed, and another 13 percent said they were unemployed.

"That is 59 percent of all graduates essentially saying that after preparing themselves for the workforce, they couldn't find a place in the workforce that gave them fulfilling and rewarding work," Hutchinson said. "That sounds like a recipe for discouragement."

The standard of living report was based in part on national surveys of jobseekers, employers, state employment service officials and residents polled in what is referred to as a citizen survey. (Surveys were also conducted in 10 countries.) Accenture did additional interviews beyond the national survey in 12 states, including Ohio.

Most of the Ohio responses varied little from those of the national survey.

The Ohio survey showed that:

14 percent of jobseekers said it was easy to find the right job.

1 percent of employers were highly confident the government is doing enough to support job creation.

5 percent of employers said the government is working closely with businesses to anticipate the future skills requirements in their fields

Five hundred people were interviewed nationally for the citizen survey, with an additional 400 in Ohio. Nationally, 1,000 were interviewed for the jobseekers survey, with an additional 400 interviews in Ohio. Nationally, 300 were interviewed for the employers survey, with an additional 100 in Ohio. Nationally, 100 were interviewed for the public employment services officials survey, but no additional interviews were conducted in Ohio.

"In Ohio -- as much as anywhere in the nation -- we see this skills gap problem," Hutchinson said. "You have a jobseeker, who has skills, but can't find an employer who needs their skills; and you have an employer, who needs skills, but can't find workers who have them. You have both a skills gap and a matching problem."

Hutchinson said the best way to prevent the standard of living from eroding is for governments to create effective strategies focused on job training, job preparation skills and job placement. Such strategies will not only provide jobseekers with the skills employers are looking for, but match them with companies looking to hire them. He said in order for such strategies to be implemented with impact, states need to take the lead in unifying diverse efforts.

"We have a very robust focus on making sure that we are driven by what the skill needs are of employers who are hiring in our community," said Grace A. Kilbane, who recently became executive director of the local Ohio Means Jobs office. "We have a business services group that goes out and talks to employers and finds out what their needs are. We have a system that allows us to match the skills of jobseekers with employers.

"We also align our investments in training," she said. "We make sure that training is in only in-demand jobs. If you want to get trained in a job that is not in demand, we are not going to pay for that."

In addition to linking jobseekers with employers and creating a pipeline of workers -- for example, by directing training dollars toward in-demand fields -- states must focus on getting "real time" information about the job market, Hutchinson said. This includes information about current openings, the industries that are growing and the skills and competencies that are in greatest demand.

Kilbane said the state's recently re-launched OhioMeansJobs.com website is capable of supplying such analytics.

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